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March 20, 2019 | English and Arabic | Ishac Diwan
Politics and the Challenge of Diversification in MENA Oil-Producing Countries

The prospect of contemporary lower oil prices suggests that petroleum-producing states will need to ultimately cut their consumption unless they manage to improve national productivity. Given this prospect, these countries are trying to improve economic efficiency, diversification, and private sector development. How this plays out in different countries has yet to be determined. This policy brief argues that each country’s economic fate will depend on the political choices that its leaders make. These calculations depend on the national population and size of petroleum reserves in a given state, in addition to how governance and political systems develop over time. In high oil countries, the main political challenge entails reducing the advantages now afforded by their private sectors, while by contrast, the main political challenge in middle-oil countries is improving the position of the private sector by reducing constraints placed on private firms. This means that there is no simple or best reform path that can be recommended, as solutions will have to be found for specific sets of political, economic, and social circumstances facing each country.

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